McDonald's is doing much better as of late. I have always watched this company for two reasons. First of all, the restaurant industry is extremely tough, with low margins and lots of competition. Secondly, McDonald's is huge and since there is already one everywhere you go, their options for growth are limited so they have to be creative. Anyway, here is what they have been doing:
New CEO Jim Cantalupo has made the long overdue change of slowing annual store growth to about 1% to 2%, vs. the 5% or more of previous years. And McDonald's has reported several straight months of same-store sales gains in the U.S., indicating better productivity per outlet. In August, after more than a year of negative monthly performance, its Europe stores also saw a modest same-store gain of 1%.
Mickey D still has plenty to do. Being the largest player in a mature business, with strong competitors like Wendy's (WEN ) at its heels, McDonald's will never get to rest. It will take more food innovations, more cost cutting, and continued improvement in Europe. Further down the road, it'll also need to figure out how much and when to add stores in areas like Japan and Latin America, where economic growth is less-than-stellar.
While not quite culinary quantum leaps, both the McGriddle breakfast sandwich and new salad entrees are examples of fresh thinking long overdue for the Oakbrook (Ill.) burger chain. But "they have to keep new-product momentum going to keep same-store sales momentum," says Tim Ghriskey of Ghriskey Capital Partners in Bedford, N.Y.
I think business leaders in mature industries should watch McDonald's for tips on how to be successful in a mature industry.